1970 (12) TMI 27 - HC - Income Tax

Interpretation of section 297(2)(a) of the Income-tax Act, 1961 - validity of assessment wrongly made under Income-tax Act, 1961 instead of under the Indian Income-tax Act, 1922

Summary

Issues:
Interpretation of section 297(2)(a) of the Income-tax Act, 1961 for assessment year 1961-62; Jurisdiction of the Income-tax Officer to make assessment under the 1961 Act; Validity of assessment order and subsequent proceedings; Application of provisions of the repealed Act to assessment proceedings; Exercise of extraordinary jurisdiction under article 226 for quashing orders.

Analysis:
The petitioner filed a return voluntarily for the assessment year 1961-62 before the Income-tax Officer. Subsequently, notices were issued under different sections of the Income-tax Act, leading to a fresh assessment under the 1961 Act. The petitioner contended that as the return was filed before the commencement of the 1961 Act, the assessment should have been made under the provisions of the 1922 Act, rendering the assessment and subsequent proceedings invalid.

The petitioner argued that the Income-tax Officer had no jurisdiction to make the assessment under the 1961 Act, citing section 297(2)(a) which provides for continuation of assessment proceedings under the repealed Act if the return was filed before the commencement of the new Act. The petitioner relied on judicial observations to support the mandatory nature of this provision and the importance of the timing of the return filing in determining the applicable law for assessment.

In response, the respondents contended that the jurisdiction of the Income-tax Officer to make the assessment was not invalidated by applying the wrong provisions of law. They argued that procedural aspects of the Income-tax Act do not affect the jurisdiction of the Officer, and any errors could be rectified through proper procedures provided in the Act itself. Citing relevant case law, they emphasized that a wrong reference to the power under which an order is made does not necessarily render the order invalid if the Officer had the authority to make the order under a different provision of law.

The Court considered previous judgments where similar issues were addressed, highlighting the importance of ensuring assessments are made in accordance with the correct legal provisions. While acknowledging that the assessment should have been made under the 1922 Act, the Court noted that the lack of jurisdiction was not initially raised by the petitioner before the Appellate Assistant Commissioner or the Tribunal. Consequently, the Court found that the Income-tax Officer had the authority to make the assessment under the repealed Act, and the petitioner's failure to raise jurisdictional issues in a timely manner led to the dismissal of the rule.

In conclusion, the Court held that the assessment and subsequent orders were not void ab initio, as the Officer had the authority to make the assessment under the provisions of the 1922 Act. The Court emphasized the importance of timely appeals and rectifications to address any jurisdictional issues, ultimately discharging the rule and allowing the petitioner to apply for cancellation of the security furnished.